Venture Capital Champ

Jennifer LeClaire (Oct/Nov 07)

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California is home to a multitude of venture capital (VC) firms and innovative startups, so it only makes sense that the state would win bragging rights for VC investment. The San Francisco Bay area saw 208 deals and $2.5 billion invested in the second quarter alone, according to the Ernst & Young and Dow Jones VentureOne quarterly VC deal flow numbers. Meanwhile, Southern California's second quarter featured 76 rounds and more than $1 billion in financing.

"California is the place for companies dependent on venture capital funding," says Thomas Loo, co-managing shareholder in the Los Angeles office of Greenberg Traurig. "VCs tend to make investments close to home so it's not too difficult to manage them. It's not a coincidence, for example, that a lot of Silicon Valley VCs make investments in companies located there. We have a wealth of capital in California."

Ernst & Young and Dow Jones reported a notable trend: continued diversification in life sciences investments, particularly with medical devices, which saw investments skyrocket to $1 billion in 75 deals. Information technology is also an investment darling. Since California holds the life sciences crown stateside and has built a reputation for hosting innovative technology companies, the report is good news for both established and fledgling companies there.

"For more than two years, we've seen steady growth in the amount of venture capital invested and the promising liquidity markets - on the public exchanges for technology companies and primarily in mergers and acquisitions for healthcare companies - look to be driving investor optimism," says Jessica Canning, director of Global Research at VentureOne. "Healthcare continues to attract nearly one-third of all venture capital dollars, and medical device companies, interestingly, are converging with biopharmaceuticals as a major draw for investors."